Question

The manufacturing overhead budget at Foshay Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 5,800 direct labor-hours will be required in May. The variable overhead rate is $9.10 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $104,400 per month, which includes depreciation of $8,120. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for May should be: Multiple Choice $25.70 $9.10 $18.00 $27.10

Answer 1

Answer:

$ 27.10

Explanation:

Given

The direct labor budget 5,800

Variable overhead rate is $9.10 per direct labor-hour.

Variable Overhead = 5800* $ 9.1=  $52780

Budgeted fixed manufacturing overhead is $104,400

Total Budgeted Overhead = $ 157180

Budgeted Labor Hours 5800

Predetermined Overhead rate = $ 157180/ 5800= $ 27.10

The predetermined overhead rate is calculated by dividing the total budgeted overhead by the budgeted hours.

The total budgeted overhead includes the variable overhead and the budgeted fixed overheads.